AbCellera Biologics Inc: Cool Relief, Hot Commercial Opportunity - Initiate at Buy

We initiate coverage of AbCellera (ABCL) with a Buy rating and $18 PT. We see ABCL635 as a potentially transformative therapy in menopausal hot flashes, with a ~$13B commercial opportunity in menopause by 2035. Our $3.3B menopause risk-adjusted 2035 sales estimate, versus cons. at $1.5B, reflects our view that '635 can capture greater share of a larger market than investors currently anticipate. Assuming the Phase 2 efficacy and safety profile holds up in larger studies, we believe '635 has best-in-class potential. As the clinical story continues to de-risk, we expect investor focus to shift toward the commercial opportunity. Rising awareness, declining stigma, and expanding telehealth access should drive market growth and greater appreciation of the opportunity. We view the stock as attractive on the menopause opportunity alone, with oncology-associated hot flashes and the early pipeline providing additional upside. In Phase 2, '635 achieved a 5.3 placebo-adjusted reduction in vasomot